Sainsbury's dire figures shock

13 April 2012

SAINSBURY'S posted dire sales and a profit warning today but sweetened the pill with the news it had sold its US business Shaw's for £1.37bn and would be returning £680m of that to shareholders.

The supermarkets group warned that profits would show a slight fall for the year just ending, sending analysts rushing to downgrade. The consensus forecast had been for £710-£720m, against last year's £695m.

It also warned 'there is likely to be a further impact on underlying profits in 2004-05'.

That sent the shares sliding by 14 3/4p to 267p in early trading, with 19m changing hands.

Like-for-like sales fell 0.9% in the most recent 12 weeks, against City forecasts of a 0.5-1% increase, showing it is still trailing way behind rivals Tesco, Asda and Wm Morrison. Margins were also hit.

Chief executive Sir Peter Davis blamed disruption caused by the store and warehouse modernisation programme, and fierce price-cutting in the wake of the Morrisons' takeover of Safeway.

'It's been a tough year for Sainsbury's but we have made real progress in the Business Transformation Plan and in delivering cost savings,' he said.

He also promised more aggressive pricing and better fresh food ranges. 'From this summer we're going to be back on the front foot. We want to trade the business harder.'

He said he had warned in the third quarter that the final three months would be a disappointment. 'That's exactly what's happened,' he said. Davis also revealed Sainsbury's is negotiating the purchase of 20 stores from three different rivals.

Shaw's has been sold to supermarket giant Albertson's, in a deal which will give Sainsbury's £1.16bn cash.

Shareholders will receive 35p per share in the form of special tax-efficient B shares, which will allow them to receive the bonus in the form of income or capital.

The 202-store chain in New England, although profitable, has never taken off for Sainsbury's in the 20 years it has owned it. The sale was prompted by the 'increasingly competitive environment' in the US.

The group also announced the departure of deputy managing director Sara Weller, who is leaving to become MD of Argos. She joined as marketing director in 2000.

The dividend on the shares, which yield 5.5%, will be held this year.

'No rift' with successor

SAINSBURY'S chief executive Sir Peter Davis today denied any rift with his successor Justin King, who arrives on Monday.

The two men were at loggerheads over the phrasing of today's trading statement, according to the Financial Times. Davis reportedly wanted a more positive gloss, while King wanted it downbeat.

But Davis said today: 'Yesterday was the first time he saw the trading statement. He was content with it.'

Davis steps up to chairman amid continuing concern over his long-term successor. The company did a U-turn on the appointment of Sir Ian Prosser as deputy chairman in the face of a City revolt.

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